The denim unit of the UCO appears to have shut down resulting in a loss of more than 350 jobs . It was a part of the Raymond UCO denim. The two companies had merged their denim operations in 2006 with headquarters in Belgium and forming a combined entity manufacturing about 80 million metres of denim.
Raymond has been suffering huge losses on its denim operations for the last few quarters. In the last financial year, the losses to the tune of Rs120 cr(about USD 29 million) were declared by the Raymond Group on its denim operations.
As per reports in a national paper , Raymond appears to be willing to put its denim operations on the block. The worsening denim market coupled with increased prices of raw material – cotton – have contributed to this poor performance by the company. However, according to informed sources, Raymond has not yet taken a decision to this effect .
Raymond Denim is one of the most respected denim company in India and enjoys a good brand image overseas. It deals with all the major denim labels and is well known for its denim developments.
Then what are the reasons for the current situation?
I think the merger with UCO was mistimed . Europe is no longer the right place to manufacture low value textiles like denimand to take up cost of running a number of manufacturing units there pulled heavily on Raymond Denim’s balance sheet. To top it up, the denim markets scenario worsened , rupee appreciated against the dollar and raw material (cotton fibre) became costly, wiping out margins.
However, it still seems unlikely that Raymond will sell of its denim unit – though it may restructure it The denim operations align well with the other textile products of Raymond(Suitings,Apparel etc) and unless Raymond is unable to make a reduction in losses even in this year (with a much depreciated rupee) , I don’t think they would like to sell their denim operations.